Jiangsu Feiliks International Logistics Inc.'s (SZSE:300240) Shares Bounce 37% But Its Business Still Trails The Industry

Jiangsu Feiliks International Logistics Inc. (SZSE:300240) shares have had a really impressive month, gaining 37% after a shaky period beforehand. Notwithstanding the latest gain, the annual share price return of 2.8% isn't as impressive.

Although its price has surged higher, when close to half the companies operating in China's Logistics industry have price-to-sales ratios (or "P/S") above 1.2x, you may still consider Jiangsu Feiliks International Logistics as an enticing stock to check out with its 0.4x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Jiangsu Feiliks International Logistics

What Does Jiangsu Feiliks International Logistics' Recent Performance Look Like?

Jiangsu Feiliks International Logistics has been doing a good job lately as it's been growing revenue at a solid pace. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. If that doesn't eventuate, then existing shareholders have reason to be optimistic about the future direction of the share price.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Jiangsu Feiliks International Logistics' earnings, revenue and cash flow.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

In order to justify its P/S ratio, Jiangsu Feiliks International Logistics would need to produce sluggish growth that's trailing the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 12% last year. The solid recent performance means it was also able to grow revenue by 19% in total over the last three years. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 15% shows it's noticeably less attractive.

With this in consideration, it's easy to understand why Jiangsu Feiliks International Logistics' P/S falls short of the mark set by its industry peers. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

What We Can Learn From Jiangsu Feiliks International Logistics' P/S?

The latest share price surge wasn't enough to lift Jiangsu Feiliks International Logistics' P/S close to the industry median. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of Jiangsu Feiliks International Logistics revealed its three-year revenue trends are contributing to its low P/S, given they look worse than current industry expectations. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

It is also worth noting that we have found 3 warning signs for Jiangsu Feiliks International Logistics (1 is potentially serious!) that you need to take into consideration.

If you're unsure about the strength of Jiangsu Feiliks International Logistics' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.